A directive about the disposal of flags in the Royal Navy was issued on 26
Feb 1914 as Stores Duties Instructions, article 447. Royal Standards, British or
foreign, the standards of all members of the Royal Family, flags (silk or
bunting) personal to other distinguished personages, on being condemned for
further use in HM Service, were not to be used for decorative purposes, nor to
be sold out of the Service as old flags, but were to be torn up into small
pieces and disposed of as rags.Similar ruling for condemned foreign ensigns.
[ADM 1/8369/56]

Flags that had been flown in action were not destroyed.
War Order 2886 of 30 August 1919, incorporated into October Monthly Orders,
directed that personal naval flags including the commanding officer's pennant
could be retained. Ensigns should be framed and kept on board whilst the ship
was in service, and then transferred to a museum or other suitable place.
[ADM 1/8567/245]

Ships could present a Battle Ensign to a town with which
it was associated. In 1949 Admiral Sir W. Tennant offered the Union Jack, that
had been flown as a Battle Ensign by HMS Nottingham at the Battle of Jutland
(1916), to Nottingham Cathedral, noting that, "At Jutland we all flew very large
Union Jacks from each masthead." [ADM 1/21533]

The main Battle Ensign flown by HMS Exeter at the Battle of the River Plate
remained in the possession of the commanding officer, and then passed to the
Maritime Museum, while the second Battle Ensign went to the City of Exeter. [ADM
1/10456]

Some warships were presented with sets of silk flags for use on
ceremonial occasions, and an effort was usually made to find a home for them
when the ship was scrapped. The battleship HMS Malaya which was paid for by the
Council of the Federated States of Malaya had a set of silk flags presented by
the European Ladies of the Federated States; a 30 foot White Ensign, a 15 foot
Union Jack, a 15 foot Malayan Jack, and two miniature Malayan Jacks for the
ship's chapel. They were to be flown whenever HM the King visited the ship, and
on 31st May, the anniversary of the Battle of Jutland. The Malayan jack was
flown at the foremasthead. [ADM 1/8692/250]

The directive was changed in 1943 after torpedo coupling screws had been sent
to the United States wrapped in parts of an American flag. Following a complaint
from the American Embassy, Stores Duties Instructions were amended. "In future
all national flags are to be destroyed and not used as 'bundling (bunting
old)'". [ADM 1/12955]David Prothero, 2 February 2002